2008 (8) TMI 126 - HC - Income Tax

AO invoked S.145 and made assessment by applying gross profit rate of 15% on the sales disclosed by the assessee, and accordingly additions were made to the different result on appeal by assessee tribunal reduced the G.P. rate at 2.51%. revenue challenging the acceptance of GP Rate by the Tribunal on ground that tribunal ignored the relevant material concerning assessee s own result of the previous year, is not justified tribunal s decision cannot be vitiated revenue s appeal dismissed

Summary

Issues involved:
1. Challenge to the gross profit rate applied by the Tribunal based on previous year's results.

Analysis:
The appeal before the High Court was filed by the Revenue against the Tribunal's judgment, which dismissed the Revenue's appeal and partly allowed the assessee's appeal, maintaining the gross profit rate at 2.51%. The Assessing Officer had rejected the books of accounts, applied a gross profit rate of 15% on the sales disclosed by the assessee, and made additions to the result. The Assessing Officer considered the gross profit rates of the assessee in previous years and compared them to other assessees in the same line of business. The Commissioner upheld the invoking of Section 145 and applied a gross profit rate of 14.5%. The Tribunal considered the comparable cases for applying the gross profit rate, emphasizing the need for comparability in terms of business volume, location, and other factors. Since the assessee's gross profit rate of 2.51% was accepted in the preceding year, the Tribunal held that the same rate should be applied for the current year.

Regarding the contention raised by the Revenue about the reduction of the gross profit rate from 16.04% in 1998-99 to 2.51%, the counsel for the assessee supported the Tribunal's decision, stating that the 2.51% rate was upheld in the assessment year 1999-2000. The factual aspect of the gross profit rate being 2.51% for the previous year and being upheld by the Tribunal was not disputed by the Revenue. The High Court noted that the question framed for consideration pertained to the Tribunal's alleged ignorance of relevant material from the assessee's previous year's results, which was the 2.51% gross profit rate. As the Tribunal had upheld the same rate for the current year, the question was answered against the Revenue and in favor of the assessee.

In conclusion, the High Court found no merit in the appeal and dismissed it, upholding the gross profit rate of 2.51% for the assessee based on the principles of consistency and comparability in determining the rate.